What Is Procurement?

What is Procurement? Procurement can be defined as the process of purchasing goods, works or services at the most economical total cost, while adhering to any specific requirements. The Procurement process should be optimised for benefit of the authority, supplier, or individuals and should be secured by signing a contract.

Procurement usually involves the acquisition of goods, works or service which are required either as a raw material or for operational purposes for a company or individual. Quality checks are also required as part of the Procurement process, and suppliers are usually screened by the procuring company. Procurement processes usually lead to a good business relationship between the procuring company and the supplier.

Other terms for procuring include gaining, purchasing, buying and acquiring, and these provide in insight into what Procurement is. The Procurement process can vary between different companies, particularly when individuals are procuring goods or services for themselves, or when public sector organisations are procuring.

Electronic Procurement, which includes electronic invoicing, electronic ordering and electronic payments, is becoming more and more popular, with benefits including faster delivery and quicker payment.

Procurement procedures can also differ depending on the type of product or service being procured. While cost is the decisive factor in most Procurement exercises, factors such as reliability can outweigh cost when deciding on the successful supplier.

Procurement processes are carried out in some form or another in virtually every organisation, and are integral to smooth business operations.

Developing trends in Procurement

Recently, a great deal of emphasis is being placed on procurement processes. The recent economic troubles, stiff competition and growing inflation are some factors which are thought to be responsible for this growing phenomenon. Unlike several years ago, when procurement was generally considered to be merely buying raw materials or machinery, the idea behind procurement has changed dramatically in recent times. Several new trends and developments have taken place in this regard.

Among the most important trends in this regard is the widespread use of online procurement.The web is playing an increasingly important role not only for direct procurement, but for indirect procurement as well. B2B activities are forming a major chunk of e-commerce activities, instead of B2C, as was previously believed. B2B procurement activities are on the rise on internet by the smaller as well as larger companies. The internet has brought about significant changes in the profit structure between the supply chains by reducing the number of intermediaries, which is an effective step in terms of lowering costs. Another major change that has been brought about is the level playing field for both large as well as small enterprises. With the amount of information available on the internet, even the smaller enterprises are able to procure at favourable rates, which also helps them to lower their cost of production. With access to a larger number of buyers as well as sellers, absolute advantage and monopoly is out of question. This generally means that the best rates are available when procuring.

Corporate procurement practices often rely on global sourcing these days. With the virtual world now emerging as the new workplace, it has become relatively easier to get in contact with suppliers all across the world and get the best rates. Although there might be several legal hurdles involved, global sourcing is nevertheless emerging as a clear favorite among a majority of the enterprises. Getting supplier information is incredibly easy, with details available in only a few clicks of the mouse. Just surf through the suppliers list, visit their websites, go through their product specialization lists and rates and get in contact with them.The costs can be reduced further by sharing supplier information. Enterprises can also opt for reverse auctions as well. This would help an enterprise in getting the best deals.

Procurement is an evolutionary process. What might appear to be the next big thing may be rendered absolutely obsolete the next day with the emergence of newer trends. Nevertheless, one cannot ignore the trends if one wants to survive in this scenario of cut throat competition.

What Is Procurement?

What Is Procurement

The term Procurement is mentioned a lot in Business, but many still find themselves asking the question – What is Procurement?

Procurement is the full cycle of the acquisition of works, goods or services, beginning from the point where a requirement has been identified, through to awarding and managing a contract with a supplier to provide the required service. Procurement processes can be used to acquire anything from stationery to the building of a new school.

The term Procurement is regularly used by public sector organisations such as local authorities and National Health Service.

Public bodies’ Procurement processes can have varied objectives; while receiving the most economically advantageous service is the most common objective, Procurement processes are often used to meet other objectives, such as to obtain a more environmentally friendly service.

what is procurementCollaborative contracts are becoming more commonplace; where multiple public bodies will combine their requirements and run a single Procurement process to meet their merged requirements. Due to the higher volume of business promised by collaborative contracts, suppliers will usually offer larger discounts. Collaborative contracts are usually led by one public body, acting on behalf of the others. In addition to this, some Procurement Centres of Expertise set up and manage contracts on behalf of public bodies, allowing all public bodies to use these collaborative contracts. Some examples of these Centres of Expertise are OGC, Buying Solutions and Procurement Scotland.

The stage of the Procurement cycle when suppliers are invited to submit bids is known as the Tendering process. Usually, in addition to submitting their monetary bid, suppliers are required to respond to a questionnaire which the public body has put together with the intention of identifying and eliminating suppliers who are unable to meet their basic requirements, thereby preventing their tender from being successful regardless of whether they have the most economically advantageous bid.